The Australian housing market's 10.2% top-to-bottom fall, from September 2017 to June 2019, left investors and homeowners a tad jittery. But in the past month, a decidedly optimistic tone has become detectable in the voices of property analysts, and for good reason: the Australian housing market is going up, at least on the eastern side of the continent.
The positive stats
Dwelling values increased across all eastern state capital cities in September 2019, including increases in value of more than 1.9% in Sydney and Melbourne. Sydney's property market has experienced a 3.6% increase from July to September while both Melbourne and Sydney have also enjoyed a rise in auction clearance rates to about 75% since May. Nation-wide, real estate listing website Domain reported a 4% increase in listings since the start of September and an increase in the national auction clearance rate of 2%.
What's driving market improvement?
Well-known property commentator Michael Yardney attributes the market bounce to a combination of interest rate cuts, tax cuts, positive media coverage and the easing of lending guidelines. It clearly hasn't hurt that May's federal election is a distant memory too, helping to increase investor certainty and removing fears of restrictions on negative gearing.
Obviously markets vary by location. Below we'll take a look at the markets in Australia's four biggest cities in more detail.
- Sydney appears to be on the road to recovery - While still well below the July 2017 peak, Sydney property values have gained 1.9% since the start of July (as mentioned above). Unit values have actually increased 2.5% since the low in May this year, a somewhat faster recovery than houses. Notably the top end of the property market has felt the biggest recovery (although it must be said this part of the market was also falling faster previously than the medium and low ends). According to Domain, fully one third of Sydney's properties listed for auction sold prior to auction - a positive sign of demand. Sydney's population continues to grow, with the city creating more and more jobs and the economy going strong.
- Melbourne's listing volumes haven't recovered as yet but housing values have - Melbourne has experienced a 1.8% rise in housing values overall since the middle of the year. As with Sydney the biggest improvement has been felt at the top end of the market and units are also going stronger than housing (with increases in value of 2.4% and 1.6% respectively since the start of July). As Australia's fastest growing capital city (thanks in large part to international migration) investing in property in Melbourne continues to make sense.
- Brisbane is going steady with a slight increase in housing value - Brisbane didn't suffer the 2017- 2019 downturn woes to anywhere near the extent of Sydney and Melbourne. This is indicated by its overall growth in housing values (averaging 1.4% per annum) since 2015. Where Brisbane was struggling was in unit values but the months from June-August saw a 1.5% increase in unit values - a positive sign after a significant market dip from 2010 to June 2019. Brisbane, like Melbourne and Sydney, continues to attract its fair share of migrants and although the city is not growing at the same rate as Melbourne, slow and steady growth looks set to continue for the Sunshine state capital.
- Perth hasn't yet rebounded like its eastern counterparts - Median property values fell in Perth a further 0.8% in September (to $436,000). The last major bounce in prices was between 2001 and 2007 according to BIS Oxford Economics. The slump can be seen as an ongoing consequence of the mining boom which saw Perth oversupplied with housing. Ongoing job shortages in the wider region mean population growth is yet to catch up with housing supply.
With so many factors influencing the housing market, it's little wonder investors are often left scratching their heads. While population growth in the three major eastern cities is expected to benefit house prices over an indefinite period, no one has a crystal ball. At the end of the day, if you're looking to invest or buy, your best bet remains to target areas experiencing both employment and population growth as well as infrastructure additions or upgrades.